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Banks attach importance to regulatory stability and support in energy projects – survey

Estonian news - eteap September 28, 2011

Baltic News Service, Sep 28, 2011

When considering financing of energy projects banks attach importance to a stable and supporting regulatory system, it appears from a survey by KPMG.

Banks interviewed by KPMG expressed concern over retroactive regulation which undermines carefully prepared business models and has the potential to ruin projects. “Project financing possibilities are improved by legally binding confirmation that retroactive regulation which would affect financing schemes after the signing of contracts will be avoided,” partner at KPMG Baltics OU Taivo Epner said.

It is estimated that the European power sector will require approximately 1.9 trillion euros in investment over the next 25 years to satisfy the growing demand for power and meet the increasingly tight environmental requirements. In the next 15 years around 600 gigawatt of new power plant capacity will have to be commissioned which requires around one trillion euros in funding.

Although western Europe will account for most of the added capacity, the growing need for energy in central and eastern Europe requires relatively more investment in new capacities to replace the aging infrastructure. Energy consumption in central and eastern Europe is seen growing 2.1 percent annually compared to 1.3 percent growth in western Europe.

Most of the interviewed banks emphasized the importance of a stable and supporting regulatory system for project financing. It is a key requirement among lenders that governments should deepen trust in the sector and provide clear guidance on the basis of their support for a specific project or technology, said Peter Kiss, global head of power and utilities at KPMG.


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